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B. Venkatesh

THE following strategies are based on Thursday's trading in the derivatives segment on the NSE. The strategies (ONGC and BoB) are constructed to take advantage of small reversals in futures prices.

The positions may run counter to the primary trend. Protective stops are, hence, important. If futures price gaps down on Friday so as to trade 2-3 points below the recommended entry price, traders should enter the position after the price breaks below the 5-minute low. The position is typically valid for 2-3 trading days.

However, considering the high underlying volatility, it is best that the position is closed by end trading Friday. The targets are accordingly placed near the recommended entry price. For this reason, it may not be optimal to set up options-based positions as alternative strategies.

ONGC: Sell May futures if it trades below 855. The downside target range is 847-845. Initiate the position with protective stop at 859. The minimum order size is 300 units. The open interest position is about 10 per cent of the market-wide limit.

BoB: Sell May futures if it trades below 193.50. The downside target range is 188-185. Initiate the position with protective stop at 199. The minimum order size is 1400 units. The open interest position is about 25 per cent of the market-wide limit.

Nifty: The May futures contract closed at 1950.80. The outlook may turn negative if the May contract trades below 1940. In the event, the downside target is 1928. Sell May futures if it trades below 1940. Initiate the position with protective stop at 1965. Trail the stop to control the downside risk. Note that this contract can be carried overnight if the position is not stopped or the target is not reached intra-day. The margin on the futures position is approximately 10 per cent of the contract value. The minimum order size is 100 units.

(The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)

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